Rentals initially cost just 50 cents each. By April 1999, Netflix’s video library expands to 3,100 titles. DVD rentals were never Netflix’s endgame – they were just a way for the new company to gain a tentative toehold in an intensely competitive market.ġ997: Netflix launches with a video library of approximately 900 titles, with a 7-day maximum rental policy.
PHILADELPHIA WATCH CASE COMPANY TWENTY YEARS TV
They saw an opportunity to use the internet to decentralize entertainment and unbundle premium TV from the monopolistic grip of Big Cable, even if nobody else recognized their initial play for what it was. As a result, when Netflix launched in ’97, many people understandably thought the business was focused exclusively on distribution-most people saw Netflix as nothing more than a more convenient way to rent movies.Īlthough this was a crucial element of Netflix’s early business, Hastings and Randolph never set out to be the best entertainment distribution company. In 1997, Blockbuster was the undisputed king of the home entertainment rental vertical, which made Netflix’s mail-order DVD rental business unique. Fearing what his wife would say about such a steep late fee and convinced there must a better way to rent movies, Hastings began to devise what would later become Netflix.Īlthough Randolph later disputed Hastings’ story about their company’s origins, Netflix did indeed set out to change the way we rented movies. Upon returning the movie, Hastings was told that he owed $40 in late fees. Legend has it that Reed Hastings decided to start Netflix after returning a copy of Apollo 13 to his local Blockbuster.
So we had to come up with a positioning which transcends the medium.” – Marc Randolph But if we were to come out and say, ‘This is all about downloading or streaming,’ and we said that in 1997 and ’98, that would have been equally disastrous. “One of the biggest challenges that we had, which I think is also one of the things we did very well, is recognize very early on that if we were going to be successful, we had to come up with a premise for the company that was delivery agnostic. Hastings and Randolph may have built their initial business around DVDs, but they knew they wouldn’t be in the DVD business forever-even if nobody else did. Netflix’s secret weapon wasn’t luck but rather a keen understanding of its market.
Netflix has definitely had its fair share of these kinds of opportunities, but good fortune had very little to do with the company’s early wins. To the casual observer, Netflix might look like one of the luckiest companies in the world.įor every major change or development in the home entertainment market, Netflix always seems to be just off-screen, waiting to capitalize on the latest consumer trend. 1997-2006: From Video Rentals by Mail to Smart Suggestions by Algorithm We’re going to examine how Netflix’s growth has been propelled by developments in how, when, and where we consume entertainment, as well as the challenges that threatened to sink Netflix and where the company could go in the coming years. How producing its own content became a flywheel for customer acquisition and growth for Netflix.How Netflix built upon its DVD rental business to launch its online streaming service.Why Netflix built its business around a single growth metric that its competitors overlooked.It just didn’t look that way to most people in the beginning.
PHILADELPHIA WATCH CASE COMPANY TWENTY YEARS MOVIE
As we’ll see, it makes perfect sense that Netflix became a movie studio. But many of the most pivotal moves Netflix has made during the past 20 years haven’t been all that surprising. They started with a frictionless DVD rental business facilitated by the internet, developed an entirely new streaming business from scratch, and finally invested in original content creation. Netflix has innovated in several key ways. It meant making business decisions that were so difficult and so ambitious, few people could even see them, let alone understand them. How did Netflix go from renting movies to making them in just 20 years?įor Netflix, however, doing the obvious rarely meant taking the easy way out. Fast forward two decades and Netflix has become one of the biggest TV and movie studios in the world, with more subscribers than all the cable TV channels in America combined. When Reed Hastings and Marc Randolph founded Netflix (formerly known as Kibble) in 1997, the company appeared to be little more than an upstart DVD rental business whose only real value proposition was the mail-order element of its operation. It’s hard to believe Netflix is 20 years old.
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